Deutsche Bank, Complacency and Markets
Trader Scott’s Market Blog
October 2, 2016
Deutsche (how do those Germans manage to string so many consonants in a row) Bank (DB) is the new obsession with markets and it will remain so until the next obsession takes over. This is how markets work. Markets are run by human beings with emotions. So for those who keep telling me that (emotionless) algos and A.I. are rigging and controlling the markets, then why do we constantly move from one obsession (a human emotion) to the next? And where do the constant, consistent emotional roller coasters come from, if markets are allegedly controlled by unemotional beings?
But, this and thisand this areZero Hedge stories about DB over the weekend. However, I would stress caution in ever getting caught up in anything which markets are obsessing about. We then lose our focus as to what we should be doing in markets and when and why. A better strategy is to decide if there is an investment or trading opportunity by taking the other side of the obsession du jour. And to view that in terms of the big overall TREND and the shorter term time frame TRENDS. As some of the subscribers know, I believed there was a very short term trading opportunity in DB stock late last week, but that does not change my view about the big overall TREND in DB, nor does it alter my view of the overall outlook for the global financials. And it’s very ugly, as is my outlook for the global economy.
I have included four charts of financial powerhouses. With the exception of Wells Fargo (WFC), the charts show the horrific performance of the stocks since the financial crisis of 2007 – 2009. That crisis is still ongoing. It has just been horrifically “papered over” since then. And the stocks “know” it. I have no investment positions in any of those four stocks, nor do I have any investment positions in any stocks (long or short), except for the miners (long). But I will continue watching and waiting for a short position in WFC. I do believe there is a tremendous amount of downside potential. But I need to see lots of “good news” and a rally into RESISTANCE zones, before that opportunity would unfold.
As to the current obsession, DB, my belief is that the market will attempt to force Angela Merkel’s hand and willattempt to make her fold on her bail out stance. And possibly a global consortium will be put together to attempt to stave off/paper-over the disaster once again. And we’ll likely get a short term rally from the “good news”. But from here forward, the rallies from these paper-overs/attempts will not “stick” nearly as well as the earlier ones did. Like that sixth layer of wallpaper at your rental house. But DB is just a symptom. There will be more and more symptoms arising faster and faster as we get into 2017 and beyond. Please read this previous post for a quick overview. The people are restless and getting more so every week. And there is nothing that will stop the restlessness from accelerating. The old tricks by the omniscient policymakers are having less and less potency. They no longer “work” as well. The central bankers brilliant experiment with negative interest rates (how oxymoronic, or just moronic) has already been recognized as a total failure. The next total failure will be helicopter drops.
But this is not 2008, the overall conditions are vastly different. The global economy’s belly wasn’t nearly as stuffed with debt/derivatives as it is now. Every new dollar of net debt is weighing down the economy more and more. The bail-outs will no longer “work”. And yet with all of this around us, the markets are almost completely complacent. That’s very worrisome. I’m concerned about the PMs being dragged into this (much less so gold itself). But having said this, complacency is not a timing tool. It’s only a warning flag, certainly not a reason by itself to go short. Do you know how many people over the years have been demolished, because they shorted markets just because of warning flags. I’ve had to learn the hard way myself.
So to wrap it regarding markets, I am patiently waiting for the opportunities to appear. That would be: looking to add PMs into the buy zones on the recent charts that have been posted; looking to short the general stock market on rallies into RESISTANCE; and looking to buy US$s into selling waves. Also, I’m very bullish on agriculture.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.